Consultation Paper on PRIIPs with environmental or social objectives (‘EOS PRIIPs’)

General comments

The Swedish Investment Fund Associaiton (SIFA) is a member of EFAMA and fully endorse the reply sent by EFAMA. However, SIFA would like to stress some comments and provide a national perspective on the consultation.

On The Swedish fund market a majority of the fund managers have some kind of ESG policy. As of last year all members of the Swedish Investment Fund Association produce an annual sustainability review that describes how the fund management company works with sustainability issues and which includes concrete examples of how this work has been conducted in practice in the preceding year. Since two thirds of the members of the association is also signatories of the PRI the awareness of ESG investments and ESG perspectives is high.

It should be further highlighted that UCITS funds are exempted from the Priips regulation until the end of 2019. However, explaining an ESG approach to the investments of a fund in the key investor information document is nothing new. It is already considered appropriate to explain such an approach under the heading Objectives and Investment Policy if such an approach is part of the fundamental policy or the legal documents of the fund. A general comment is that the same should apply to the Priips KID – those investment products with an ESG or EOS objective in their legal documentation should highlight this in their Priips KID.

SIFA is questioning the GAP analysis performed by ESA:s to show where there are discrepancies between the different legal acts. UICTS funds and AIF:s are not and should not be regulated by the MiFID II. That does not mean that sectoral legislation does not cover the same objectives as MiFID. Sectoral legislation has dealt with the same issues in different ways. EFAMA has shown where there are rules covering the same aspects as the product governance rules. SIFA is of the opinion that the product governance rules should not be seen as a prerequisite for EOS PRIIPs. 

Technical Advice 1 (p21)

The ESA :s refer to a specific Investment Policy statement which seems to require full integration of EOS investing aspects. However, there are many different strategies for sustainable or EOS investments. The investment policy should reflect the investments of a product and these strategies should be explained in the KID but the rules should not exclude any strategies as this would be harmful to the developement of sustainable investments.

All investment products will have some kind of investment policy. The investment policy is the agreement with the investors to adhere to a certain policy or strategy when investing the money a manager has been entrusted. It is not clear if ESA :s refer to a different investment policy. SIFA would suggest that the EOS objectives of an investment product should be included into the main investment policy of the product and that there should be no new documents to produce. 

Technical Advice 2 (p21)

As has been explained above SIFA also questions the conclusion of the ESA :s as stated in Section 4 that all manufacturers of EOS Priips should comply with MIFID II or IDD. The different sectoral legislation has dealt with product governance  issues in different ways due to the differences in the products. This should be taken into consideration when comparing the rules. 

Technical Advice 3 (p22)

SIFA is questioning the reasoning of the ESA :s when stating that the money invested are only used to ensure the EOS objectives. Sustainable investments may have as its objective to reach a specific impact but direct impact is often very hard to prove. Sustainable investments might, however, have an impact over time. Other reasons for pursuing a particular sustainable investment strategy is that investors might not want to invest into certain areas. Such investments, even though they are sustainable, might not have any direct impact at all but the investment strategy is still very relevant to the investors and should be highlighted in the Priips KID.

SIFA is highly sceptical to the statement by ESA on p. 25 paragraph 18 that negative strategies might not be sufficient. Ruling out such strategies from the Priips KID will hinder the developement of sustainable investments and  discurage manufacturers of Priips products from pursuing EOS strategies. 

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